You may have heard of the benefits of a HECM (Home Equity Conversion Mortgage) reverse mortgage. Still, if you are an older homeowner with a high-valued home, you may be unaware that there is a specific reverse mortgage, the HomeSafe® jumbo reverse mortgage, geared for your situation.
The HomeSafe Reverse Mortgage
For homeowners 60* or older, the HomeSafe® suite of reverse mortgage products, offered by Finance of America Reverse (FAR) LLC, is one of the few jumbo reverse products available to and potentially more applicable, for eligible borrowers who own a property valued at $1 million or more.
FAR HomeSafe advantages over traditional HECMs:
- Loan amounts of up to $4 million, significantly higher than a HECM allows;
- No mortgage insurance premium;
- No initial disbursement limitation – borrowers take the full amount at closing.
Retirees living in condominiums may also take advantage of reverse mortgages; however, not all condos have the FHA-approval required for HECM financing. A unique distinction of jumbo reverse mortgages is that condos appraised at $500,000 or more do not require FHA approval, allowing potential eligibility for a HomeSafe jumbo loan.
HomeSafe borrowers have used this loan for many purposes: To pay off an existing mortgage and have no more monthly mortgage payments;* have funds for healthcare needs; to protect retirement investments by allowing the borrower to delay selling during a market downturn, and more.
A suite of reverse mortgage products
The HomeSafe reverse mortgage loan offers borrowers more flexible options than ever before. You can choose to take your loan proceeds as a line of credit, monthly advances for a set-up period; a monthly stream of funds for as long as you live in your home; a single lump sum; or a combination of these options. HomeSafe tools provide solutions from standard to jumbo reverse mortgage loans. The suite consists of HomeSafe Standard, HomeSafe Select, and HomeSafe for Purchase. While HomeSafe for Purchase offers a solution for borrowers who are looking to relocate or right-size to a new home, the HomeSafe Standard and Select products provide retirement solutions to meet individual needs. Here are several scenarios that illustrate how each product benefits specific situations.
- Lynn and Dave, both 68, own a $1,500,000 home in Northern CA
- Want to purchase a vacation home in Arizona for $650,000
- They do not want a monthly obligation of a 30-yr traditional mortgage payment
- The HomeSafe Standard product provided more than enough funds to pay cash for the new vacation home.
- Lynn and Dave can own two properties with no required Principal or Interest payments.
- Traditional financing of $650,000 at 3.92% would have cost Lynn and Dave $3,073 per month in P&I payments, for a 30-year term.
*Loan interest rate 5.99%
*Closing cost $5,726
- Terry and Maya are both 66 years old
- Home value: $2,350,000,000
- Mortgage: $400,000
- Mortgage payments: $2,530
- Investment portfolio: $1,500,000
- Asset Distribution rate due to Mortgage payment: 6%
- Safe Distribution rate: 4%
Their concern is that their Distribution rate is excessive (4% is considered a safe rate). If investments underperform, it could cause distribution rates to increase and further threaten asset longevity.
HomeSafe Select provides the flexibility and liquidity Terry and Maya needed to address their concerns while also improving their retirement funding plan’s strength.
- Existing Lien is paid off, eliminating the mandatory $2530 per month they had been paying in P&I payments.
- Eliminating the mortgage payment allows them to REDUCE their asset distribution rate from an unsafe 6% to a very safe 4%.
- The HomeSafe Select product, based on the age and initial distribution, provided a $589,190 line of credit, which can serve as a backup funding source should their investments underperform during the critical first ten years of retirement.
Learn more about your options
Just like your 401K, IRA, or annuities, home equity is a powerful financial tool that can significantly enhance your retirement funding plan. Contact a Finance of America Reverse, LLC (FAR) representative today to learn more about reverse mortgage benefits and how they may help you secure long-term financial freedom.
*For certain HomeSafe® products only, excluding Texas and Utah where the minimum age is 62.
*The borrower meets all loan obligations, including living in the property as the principal residence and paying property charges, including property taxes, fees, hazard insurance. The borrower must maintain the home. If the homeowner does not meet these loan obligations, then the loan will need to be repaid.
Oregon Only:·When the loan is due and payable, some or all of the equity in the property that is the subject of the reverse mortgage no longer belongs to borrowers, who may need to sell the home or otherwise repay the loan with interest from other proceeds. FAR may charge an origination fee, mortgage insurance premium, closing costs and servicing fees (added to the balance of the loan).·The balance of the loan grows over time and FAR charges interest on the balance.· Borrowers are responsible for paying property taxes, homeowner’s insurance, maintenance, and related taxes (which may be substantial). We do not establish an escrow account for disbursements of these payments. A set-aside account can be set up to pay taxes and insurance and may be required in some cases. Borrowers must occupy home as their primary residence and pay for ongoing maintenance; otherwise the loan becomes due and payable. The loan also becomes due and payable (and the property may be subject to a tax lien, other encumbrance, or foreclosure) when the last borrower, or eligible non-borrowing surviving spouse, dies, sells the home, permanently moves out, defaults on taxes, insurance payments, or maintenance, or does not otherwise comply with the loan terms. Interest is not tax-deductible until the loan is partially or fully repaid.
©2020 Finance of America Reverse LLC is licensed in 50 states and D.C. | Equal Housing Opportunity | NMLS ID # 2285 | www.nmls.consumeraccess.org | 8023 East 63rd Place, Suite 700 | Tulsa, OK 74133 Not all products and options are available in all states | Terms subject to change without notice | AZ Mortgage Banker License #0921300 | Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act | Georgia Residential Mortgage Licensee | Illinois Residential Mortgage Licensee | Kansas Licensed Mortgage Company | MA Lender/Broker #MC2855 | Licensed by the Mississippi Department of Banking and Consumer Finance | Licensed by the New Hampshire Banking Department | Licensed by the N.J. Department of Banking and Insurance | Licensed Mortgage Banker — NYS Banking Department where Finance of America Reverse is known as FAReverse LLC in lieu of true name Finance of America Reverse LLC | Rhode Island Licensed Lender | HUD HECMS REQUIRE PAYMENT OF INITIAL AND PERIODIC MORTGAGE INSURANCE PREMIUM.
This article is intended for general informational and educational purposes only, and should not be construed as financial or tax advice. For more information about whether a reverse mortgage may be right for you, you should consult an independent financial advisor. For tax advice, please consult a tax professional.